Pressure mounts for Italy's central bank governor to quit

Italy's central bank governor, Antonio Fazio, yesterday came under renewed pressure to quit after it was reported that he was under investigation by prosecutors on suspicion of insider trading.

The governor's dogged refusal to step down threatens to become an embarrassment to the prime minister, Silvio Berlusconi, as he prepares for an election year. He and his finance minister, Giulio Tremonti, both issued veiled warnings that they were ready to change proposed new legislation to force out Mr Fazio.

Mr Berlusconi revealed that the cabinet was to meet in emergency session on Tuesday to discuss altering a bill on corporate governance and investor protection. He said the subjects for discussion would include "the procedure for the appointment of the governor and his term of office".

Mr Tremonti, a long-standing enemy of Mr Fazio, told a radio interviewer: "Either the governor takes a step backwards or the government, together with parliament, will take a step forward."

Mr Fazio, who is under fire for allegedly conspiring to block the acquisition of Italian banks by foreigners, has an open-ended mandate. In theory, he can only be ousted by a 13-member board which, three months ago, renewed its confidence in him.

But the bill in parliament gives the government a way forward, and Mr Berlusconi's refusal to explore it until now has puzzled many observers. The proposed legislation would see Bank of Italy governors serve for only seven years, but does not apply to the present incumbent.

Mr Tremonti said he wanted a five-year term. But, despite the latest revelations, he stopped short of proposing that it be applied to the Mr Fazio, 69, who is already under investigation for suspected abuse of office.

Judicial sources confirmed reports in two Italian newspapers that prosecutors in Milan had put Mr Fazio's name on a list of official suspects for insider trading, a much more serious offence that carries penalties of up to six years' imprisonment and a fine of €3m (£2m). The affair reignited earlier this week when police arrested the financier Gianpiero Fiorani. A friend of Mr Fazio, Mr Fiorani's Banca Popolare Italian built a stake in Banca Antonveneta that threatened to scotch a bid being mounted by the Dutch lender, ABN Amro. Mr Fiorani is due to be questioned by a judge today.

Leaked transcripts of a telephone conversation appeared to show that on the night he approved Popolare Italiana's bid, the governor telephoned Mr Fiorani to give him advance warning. But Mr Fazio has not been charged with any offence and denies any wrongdoing.